- Reports say Musk on brink of walking away from micro-blogging buy
- Markets have been pricing deal failure for weeks
- Only light relief for Tesla shareholders that could be freed from Twitter risk
Elon Musk’s Twitter (TWTR:NYSE) stunt seems to be finally coming to its inevitable conclusion. The billionaire’s $44 billion buyout of the micro-blogging platform is on the verge of collapse, according to a report in the Washington Post overnight, and few market watchers will be surprised.
Musk’s team has reportedly stopped engaging in talks around funding the deal, including with a party named as a likely backer.
The idea that a drastic change of direction on the deal is close is supposedly due to concerns that Twitter’s data regarding spam and bots on the platform is not verifiable.
Others are more sceptical, believing the whole episode was a smokescreen to divert attention away from Musk’s significant share sales in Tesla (TSLA:NASDAQ) while minimising any backlash from investment markets.
Since November 2021, Musk has offloaded roughly $25 billion worth of shares in the electric cars firm, although he remains the largest single shareholder with around 163 million shares, or 15.7% of the company.
If that was the plan, it has backfired. Since early May, Tesla shares have fallen 23%, exactly matching the decline in Twitter stock over the same period.
INVESTORS SCEPTICAL ON DEAL CLOSING FOR WEEKS
Investors have been pricing the deal to fail for weeks, yet Twitter shares still fell 9% on 7 July, and are expected to lose another 4%-plus when trading reopens on Wall Street later today. That will leave Twitter stock at $37.20, more than 30% below the $54.20 that the buyout was originally agreed.
Things haven’t got much better for Tesla shareholders either, despite being inexorably linked to the deal, which you can read about here.
Tesla has lost 36% since Musk first pitched his move on Twitter, and the loss is nearer 40% year-to-date, making Tesla’s 5% rally yesterday to $733.63 scant consolation.
So, what now? With backers including Oracle (ORCL:NASDAQ) founder Larry Ellison, venture capital firm Andreessen Horowitz, Fidelity, crypto exchange Binance, and the state investment firm of Qatar among those pitching in a few billion as a part of the Twitter funding package, some awkward conversations are probably due.
There’s also the break clause to be sorted out, which will leave someone owning someone else $1billion, as laid out in the original agreement. Legal wrangling over who is at fault and whether or not Musk will be allowed to back out could take a long time to be resolved.
